While Chesapeake Energy has been in the midst of trying to resolve its growing financial problems and speculation mounts whether it will file bankruptcy, the subject has the attention of Williams Cos. which released its earnings report in recent days. Alan S. Armstrong, President and Chief Executive Officer at Williams even spoke of his firm’s relationship with Chesapeake and how Chesapeake could enter Chapter 11 bankruptcy.
“We certainly had a lot of questions about Chesapeake and our relationship and a lot of focus by investors on the credit risk related to Chesapeake,” said Armstrong in the recent conference call following release of the company’s quarter and early earnings. “So, first, I note that we have a very strong relationship with Chesapeake. We appreciate them as a great operator in the nation’s very best shale resources.”
He said he and other Williams leaders are constantly impressed with the way the Chesapeake team continued to be able to lower their cost and work out creative solutions.
“They are paying their bills in a timely manner as usual and including, we just recently got paid for the minimum volume commitment related to the Haynesville,” continued Armstrong. “Nevertheless, though, we are mindful of the credit risk that these continued low prices pose for many producers, including Chesapeake.”
Armstrong made it clear his company is following the bankruptcies of other companies and the possibility that Chesapeake could end up there too.
“Regardless, even if the court were to rule we don’t have such legal rights, our gathering lines are physically connected to Chesapeake’s wellheads and pads and we provide a very critical service, conditioning and connecting Chesapeake’s production to points where they can then choose the markets for the long-haul transportation alternatives. In exchange for the dedication of production, we invested capital to build gathering lines that are uniquely positioned to serve Chesapeake’s well.”
As he explained, many of the Williams Cos. systems and gathering lines were built out specifically for the needs of Chesapeake and they exist on populated places such as beneath the city of Fort Worth, Texas. So if Chesapeake filed for reorganization, it would have to continue using those Williams Cos. lines in order to produce gas and make payments to creditors.
“We believe that we understand much better than anyone the real value of our assets if it ever came to a bankruptcy process,” said Armstrong, referring to a possible Chesapeake bankruptcy. “Let me be very clear on this matter, we have great confidence in Chesapeake in their assets and more importantly in their tremendous operating capabilities and management team.’
He said Chesapeake has continued to do all the right things in very difficult circumstances, “and we look forward to helping them be very successful for years and years to come and we have great confidence in their ability to do that.”
